New York Times Earnings Reflect Ongoing Double Whammy

I'm little surprised by yesterday's New York Times Co. (NYT) results, though I wish I were: The Times is barely profitable.

With ad spending overall down just under double digits at 9% for the first quarter, the New York Times' results -- most likely foreshadowing those of Gannett (GCI) (April 21) and McClatchy (MNI) (April 23) -- are the result of the double whammy afflicting newspaper companies. There's a two-headed assault on revenues -- a recession-like pullback in spending compounding the already-in-progress movement of dollars from print to interactive marketing.

We know advertisers are pulling back. Gross estimates are trending downward, with the latest projecting 3.7% ad dollar growth in the US (that from Zenith Optimedia on March 31). That projection knocked .4 off an estimate made just a few months earlier. Expect, in this gyrating economic landscape, for it to go lower still. That 3.7% -- in an otherwise stable time -- might about match inflation, but it's not a stable time for newspaper companies.

The biggest factor, of course, is where those $21 billion dollars in US interactive revenues (2007) is coming from, and we know many of them are coming out of print hides. Will it get worse? I'm inclined to agree with Eric Schmidt, with his admittedly self-serving statements that recession-caused ad dollar movement will aid Google (GOOG). Newspaper advertising is still disproportionately expensive. Companies are more prudent with their spending in perceived downtimes, just as consumers are.

The Times reported an 11% increase in Internet revenues. Barely double-digit, below the growth of web advertising overall -- and of course insufficient in volume to make up print declines.

Beyond the immediate impact of the year, newspaper publishers have to ask themselves whether dollars that are going to the new medium, and being spent in other experimental ways, will come back to print, as the economy turns more positive. Or is this a one-way street: out?

The bigger point of this morning's announcement pops out of two continuing dramas at the Times Company:

• It is in public anguish about its newsroom cutbacks. The 7.5% cutback (100 of 1300) is the biggest deal out of all the newsroom cutbacks we've seen. It's the New York Times cutting back. Now, we've seen enough reports to know that too few will accept buyouts, and layoffs are appearing inevitable. The Times is not a stable ship.
• Second, of course, is the coincident boardroom drama. Two outside directors are joining the Times' board. The impact has got to be a more urgent review of asset sales -- the Globe and the regional newspaper group. With significant layoffs in the Times' newsroom and this further turndown in earnings, the urgency (noted here in February) for action is even clearer than it was when Harbinger/Firebrand began its push on the Times.

Disclosure: No positions.

Comments

[DeaverB]

It's the product, stupid, should be what is watched. The NYT used to be the "paper of record." Since the owners have become avowed "Anti-Bushers&quo... they have compromised that status. As Barbara Bush said famously to George Senior, "If you read that paper, don't talk to me about it." He canceled his subscription as have many others. Their brand was based on uncompromising integrity; by taking sides they are just another newspaper, albeit a darn good one.

[jedrury]

Formerly newspaper ad dollars will not move directly - ipso facto - to online news sites but will be found on blogs, sports sites, craiglists, entertainment sites. The bleak future is now, and next quarter now and 3rd Q now.

[sunrises]

A newspaper is easy to carry, read, and pick-up anytime without need of any protal connection or re-charging.

[karunakaran]

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